Brief verbal explanation to comments on governments claim

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Suppose the government in a very small country charges tax on some kind of food and has collected tax revenue based on that. Under the pressure of vigorous protest, it declares to return all the tax collected to the buyers and sellers of this food based on store records. Suppose demand and supply of this food have the same price elasticity and the per-unit tax return will be split evenly between buyers and sellers. The government claims that collecting and then returning tax would not hurt anyone. Assume neither demand nor supply is perfectly elastic or perfectly inelastic. Use a supply/demand diagram and brief verbal explanation to make comments on the government’s claim.

Reference no: EM131009979

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